Dunkelberg: Health-Care Semantics

Well I am relieved! I will not be “penalized” for not having health care insurance, just “taxed”.

And 4,500 new jobs will be created at the IRS to track down the “tax scofflaws” and collect the tax.

That will increase GDP as well, as we always assume that government employees create output equal in value to their salaries and benefits (even if they do nothing). I can't believe that only one Republican voted for this legislation! How did we ever get along without this?

So it was all about semantics, a “tax” vs a “penalty”, but the bottom line is the same, the law stands.

If the penalty is a tax, it’s a tax that hasn’t been levied yet so according to the Anti-Injunction act, one cannot litigate a tax until after it is imposed. As all of this unfolds, as HHS writes all the regulations it is instructed to do in the bill, confusion will reign and costs will soar. Apparently the Commerce Clause can be used to tell you what you can’t do but not what you must do. We now have a “head tax”, whether or not your income is under $250,000. And over 20 new taxes to be imposed on businesses and individuals. Penalties (I mean taxes) rise over the next few years, forcing purchase. Likely tens of thousands of firms will opt out of providing insurance, paying the “tax” for not providing insurance.

It makes no sense to have my boss shopping for my insurance anyway.

I can do it, just give me the money.

My employer takes my money and buys a very nice health care plan, but I have no health care choices. All this will force employees into the (yet to be fully established) exchanges where Washington will determine what must be included in the minimum coverage (a look at current state requirements will illustrate how absurd this can get, this of course is why one can’t shop across state lines, each state has different requirements) and more subsidies will be made, funded by taxpayers.

An avalanche of new regulations and taxes will descend on employers, 90% of whom have fewer than 20 employees. These are not big corporations, but small entities that collectively employ a huge share of the private sector workforce, and pay taxes as individuals. Their earnings will be taxed further, reducing the only source of capital they have to finance growth.

The entrepreneurs will spend even more of their valuable time complying with the regs, searching for health care insurance, wasting the most valuable resource a firm has. Will all this make health care cheaper and better and improve the functioning of the private sector? Well, if history is any indicator, it will all turn out poorly. The projected costs are surely too low (as they always have been in the past), reality is always worse, and those the government intended to help will experience little if any improvement.

No matter how the election turns out, this will not be good for a struggling U.S. economy.

William Dunkelberg is an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business.